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LONDON MARKET OPEN: Stocks get boost thanks to growth in UK economy

Fri, 12th Apr 2024 08:58

(Alliance News) - Stock prices in London opened higher on Friday, thanks to new data suggesting the UK economy is out of recession.

Eyes are also on the banking earnings season, which kicks off on Friday. Citigroup, JPMorgan Chase and Wells Fargo are due to release first-quarter numbers. Asset manager BlackRock also reports.

The FTSE 100 index opened up 61.11 points, 0.8%, at 7,984.91. The FTSE 250 was up 130.77 points, 0.7%, at 19,917.64, and the AIM All-Share was up 2.98 points, 0.4%, at 761.81.

The Cboe UK 100 was up 0.9% at 799.30, the Cboe UK 250 was up 0.6% at 17,323.82, and the Cboe Small Companies was up slightly at 14,776.24.

In European equities on Friday, the CAC 40 in Paris and the DAX 40 in Frankfurt were both up 0.9%.

The UK economy grew in line with expectations in February, according to numbers on Friday.

According to the Office for National Statistics, UK gross domestic product rose by 0.1% in February from January, in line with FXStreet cited consensus. UK GDP had expanded 0.3% on-month in January, according to upwardly revised data.

"Positive UK GDP growth in February, coming together with an upgrade to the January estimate, will do nothing to reassure markets that interest rate cuts are locked in for the first half of this year," said Nicholas Hyett, analyst at Wealth Club.

"Having said that, areas of the economy that are dependent on discretionary spending do look kind of soggy. Accommodation and food and drink services both contracted in February and the construction sector is in the doldrums (with eight out of nine sectors seeing a decrease month-on-month). There are suggestions wet weather may have played a part here, but an interest rate cut could be quite helpful to those areas of the economy nonetheless."

All eyes this week have been on interest rate decisions and when we might see some rate cuts.

The European Central Bank remains on course to lower interest rates at its June meeting. The ECB left its key interest rates unchanged, as widely expected, but policymakers said they will cut rates should they gain confidence that inflation is falling to the bank's 2% target.

ECB President Christine Lagarde again affirmed a "data dependent" approach to interest rate decisions, but did add that some in the Governing Council already have the confidence to cut.

On the other hand, hopes of a June rate cut in the US have been dampened thanks to some hotter-than-expected inflation data.

On Wednesday, the Bureau of Labor Statistics reported that the year-on-year rate of consumer price inflation picked up to 3.5% last month, from 3.2% in February, taking it further above the Fed's 2% inflation target.

The rate of consumer price inflation had been expected to pick up to just 3.4%, according to FXStreet cited consensus. The rate of inflation is now at its most lofty since September.

Thursday's US producer price data was less robust, but did pick up. US producer price growth accelerated to 2.1% year-on-year in March, from 1.6% in February.

In the US on Thursday, Wall Street ended higher, with the Dow Jones Industrial Average little changed, the S&P 500 up 0.7% and the Nasdaq Composite up 1.7%.

The pound was quoted at USD1.2512 early on Friday in London, virtually unchanged compared to USD1.2513 at the equities close on Thursday. The euro stood at USD1.0680, lower against USD1.0705. Against the yen, the dollar was trading at JPY153.26, lower compared to JPY153.30.

The FTSE 100 on Friday got a boost from housebuilders. Taylor Wimpey, Persimmon and Barratt Developments were up 2.7%, 2.5% and 2.2%, respectively.

The shares all got a boost thanks to some broker upgrades.

JPMorgan raised all of them to 'overweight' from 'neutral'. RBC also raised Taylor Wimpey to 'outperform'.

Oil majors BP and Shell also traded higher on Friday, driven by higher oil prices. They were up 2.1% and 1.6%, respectively.

With tensions pushing ahead in the Middle East and price of oil headed over the USD90 a barrel mark. Brent oil was quoted at USD90.41 a barrel early in London on Friday from USD89.94 late Thursday.

Amongst London's small-caps, Petrofac lost 25%.

The energy infrastructure company said it has "engaged and remains in discussions" with its lenders to restructure its debt which would result in a significant proportion of the debt being exchanged for equity in the business. It noted that all options remained under consideration.

The company also continues to be in discussion with investors and shareholders in relation to potential further investment into Petrofac.

"Management and the board are focussed on managing the group’s payment obligations and delivering a solution which supports the provision of guarantees required for its recent contract awards, and which ensures that Petrofac has the appropriate capital structure and liquidity to support the strength of its USD8 billion backlog," it added.

On AIM, Bens Creek plummeted 45%.

The owner and operator of metallurgical coal mines said it has laid off 44 employees.

It said that the move is due to "the depressed metallurgical coal price, combined with financial constraints at the Company and production difficulties at the mine, to substantially reduce activity at Bens Creek Operations WV."

In Asia on Friday, the Nikkei 225 index in Tokyo was up 0.2%. In China, the Shanghai Composite was down 0.5%, while the Hang Seng index in Hong Kong was up 2.1%. The S&P/ASX 200 in Sydney closed down 0.3%.

Gold was quoted at USD2,396.60 an ounce, higher against USD2,338.05.

By Sophie Rose, Alliance News senior reporter

Comments and questions to newsroom@alliancenews.com

Copyright 2024 Alliance News Ltd. All Rights Reserved.

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